Mike Ashley’s Sports Direct has threatened Debenhams’ administrators with legal action after the department store fell into administration last week, wiping out Ashley’s near 30 percent stake in the company.

Earlier this week, Debenhams appointed joint administrators from FTI Consulting, who immediately sold the company’s shares to its lenders in a pre-pack deal in return for reducing the retailer’s 600 million pound debt - a move that wiped out its shareholders’ investments in the company, including Ashley’s near 30 percent stake.

In a letter sent to FTI and seen by the Guardian, Sports Direct lawyers from law firm RPC called for the insolvency process to be reversed and for the advisory firm to be removed as administrators due to a conflict of interests. The letter said that FTI was conflicted because it had previously sold the retailer’s operating companies to those same creditos before it entered administration, meaning it was unable to independently perform its duty.

“[Sports Direct] will do everything available to it to unwind the damage caused to the company and other stakeholders (including large and small shareholders) by the events of today including but not limited to challenging the appointment [of FTI as administrators] and all consequences of it,” the letter said.

In a statement, joint administrators at FTI said: “We understand that Sports Direct as a shareholder will be disappointed that there is no value in the equity. However, the transaction delivers continuity for all group operations and was in the best interests of the group’s creditors, employees, customers, pension holders and suppliers.”

Debenhams is expected to launch a company voluntary arrangement (CVA) in the next few weeks.

Photo courtesy of Debenhams